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Bill Gunderson
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Bill Gunderson @billgunderson is the CEO and Chief Market Strategist of Gunderson Capital Managment in San Diego, CA. He is also a professional money manager, former research analyst, author of Best Stocks Now, and developer of the Best Stocks Now smartphone app. He offers four free weeks to his... More
My company:
Gunderson Capital Management
My book:
Best Stocks Now! Summer 2011 edition
  • The Dollar Tree and Pawn Shop economy. (DLTR) (FCFS) (EZPW) ( CSH)  0 comments
    May 19, 2011 5:40 PM
    The Dollar Tree Economy
    By Bill Gunderson
    Gunderson Capital Management

    The stock market may go up. It may go down. But it always tells the truth.
    Today, the market is saying we are living in a Pawn Shop economy. A Dollar Tree economy. An Autozone economy. 
    But people who put their money down on stocks are not expecting any greatness or job-creation any time soon from the big blue-chippers that occupy so much of our financial attention. 
    We are talking about, of course, companies such as GE, Cisco, Microsoft, Intel, Hewlett-Packard, Ford, GM, IBM and even Google. 
    The price of the stocks tell the story: Evan as the blue chipper stay flat, three of the bigger publicly traded pawn shop companies -- First Cash Financial, Easy Corp. and Cash America -- are doing great.
    Over the last ten years, First Cash Financial (NASDAQ:FCFS) has returned, on average, 32.7% a year to its shareholders. That’s from growth and dividend from operating 383 pawn shops.
    EZCORP (NASDAQ:EZPW) operates 368 pawn shops, returning 43.2% per year over the last ten years to shareholders.
    Cash America (NYSE:CSH) operates 676 pawn shops. Over the last ten years, it has returned 21.2% per year.
    The price of these stocks today tells us what investors think will happen to the company next year: They think the economy is going to stay the same. Or get worse.
    Don’t shoot me. I’m just the bean counter.
    Autozone is another company that does well in tough times. When consumers decide to slap another muffler on their old beater instead of buying a Lexus, they go to Autozone (NYSE:AZO).
    So do investors: Autozone has returned 24% per year over the last ten years. Contrast that with Ford Motors, losing 4% per year during the same period.
    Finally we come to Dollar Store (NASDAQ:DLTR) and Ross Stores (NASDAQ:ROST), returning 14% and 22% per year over the last 10 years, respectively. With Dollar Tree recently hitting all-time highs.
    People with the money to invest in the stock market may never even visit a neighborhood where these companies thrive. If my friends and clients catch me shopping at the Dollar Tree Store, they are going to think I am going broke, instead of being a big time investment advisor rolling in dough.
    But that is where people willing to put their money down expect to find more of us tomorrow. And many more, the many tomorrows after that.
    There are glimmers of hope: Wynn Casinos (Wynn) and Norstrom (NYSE:JWN) are returning dividends and growth to their investors.  Unrelenting excellence survives and prospers, regardless. 
    So says the stock market.
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